WHERE did that boom go? The $2.2 billion fall in construction work in the December quarter has left us with an economy that is like an old-fashioned bath, with a hot tap at one end, a cold tap at the other, and most of the bath running cold.
The fall in construction activity comes after a big one-off jump; it's no worry in itself. But new home building is at its lowest trend level since June 2003, while private non-residential building is barely above GFC levels.
But the biggest problem is we are now two economies. Our policymakers are focused on northern and western Australia, where new mines are being developed at a colossal rate, creating jobs, wealth and downstream activity. But Australia's south-east is another country.
Year on year, construction activity swelled 22 per cent in the mining states (Queensland, WA and the Northern Territory), but fell 1 per cent in the south-east (everywhere else).
Retail sales year on year grew 5.3 per cent north and west of that dividing line, but only 1 per cent where most Australians live.
Full-time jobs grew by 44,000 north and west of the dividing line, but fell by 38,000 south and east of it.
Total spending year on year in the September quarter grew 9.6 per cent in the north and west, but only 1.4 per cent in the south-east.
The Housing Industry Association tells us new home sales nationally are at an 11-year low, while the Victorian Employers' Chamber of Commerce and Industry survey finds almost half of local firms expect the Victorian economy to weaken in 2012, and only 17 per cent expect it to improve.
Two-thirds of Australia is in the cold part of the bath. Its economic activity is slowing, because the high dollar has made too much of it uncompetitive. We need policymakers to focus on how to bring it down.
But they won't. The Reserve Bank has set Australia's interest rates to restrain growth, not stimulate it, because it focuses on the hot bit of the bath. The Gillard government is slowing the economy further by new spending cuts, because it focuses on getting the budget in surplus. The high dollar is making much of what we do uncompetitive. The government cannot be just a spectator. It needs to think hard, think outside the circle, then take bold action to restore our competitiveness.
